Graphics chipmaker NVIDIA (NVDA - Free Report) is set to release third-quarter fiscal 2020 results on Nov 14 after market close. As it has been one of the hottest stocks in the semiconductor space, let’s take a look at its fundamentals ahead of earnings release.
NVIDIA has been on a stellar run over the past three months, locking in gains of about 39.6%, outperforming the industry average gain of 22.6% by a wide margin. This trend is likely to continue given the positive earnings estimate revisions, which are generally a precursor to an earnings beat though earnings surprise is difficult to predict this time (read: Top-Ranked ETFs That Crushed the Market in a Month).
Inside Our Methodology
Nvidia has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The videogame-gear specialist saw positive earnings estimate revision of four cents over the past 90 days for the third quarter of fiscal 2020. Additionally, the company’s earnings surprise history is solid with positive earnings surprise of 4.54% on average over the past four quarters. However, the company is expected to post earnings decline of 14.7% and revenue decline of 8.8% in Q3. Additionally, the stock belongs to a bottom-ranked Zacks industry (placed at the bottom 35% of 250+ industries) with an unimpressive VGM Score of D (see: all the Technology ETFs here).
According to the analysts polled by Zacks, Nvidia has an average target price of $200.64 with around 68% giving a Strong Buy or a Buy rating ahead of the company’s earnings.
What to Watch?
Nvidia has received target price hikes from two analysts — UBS and Deutsche Bank — ahead of earnings. While the company is penetrating newer growth areas such as data centers, AI and self-driving cars, its key business remains selling chips, which enhance video game graphics. Investors are looking for year-over-year Nvidia’s sales trend improvements, especially in its data-center business.
ETFs in Focus
Given the positive estimate revisions and the hike in target price, investors could focus on ETFs having the largest allocation to this graphics chipmaker. Below are five ETFs with the highest allocation to NVDA that could make compelling plays ahead of the earnings report:
VanEck Vectors Video Gaming and eSports ETF (ESPO - Free Report)
This fund offers exposure to global companies, involved in video game development, e-sports and related hardware and software by tracking the MVIS Global Video Gaming and eSports Index. Holding 25 stocks in its basket, NVIDIA takes the top spot with 8.7% share. American firms account for one-third of the portfolio, while Japan and China round off the next two with a double-digit allocation. The fund has gathered $41.7 million in its asset base while trading in average daily volume of 11,000 shares. It charges 55 bps in annual fees from investors.
iShares PHLX Semiconductor ETF (SOXX - Free Report)
This ETF offers exposure to 30 U.S. companies that design, manufacture and distribute semiconductors by tracking the PHLX SOX Semiconductor Sector Index. Of these, NVDA takes the top spot with 8.7% allocation. The fund has amassed $2.1 billion in its asset base and charges a fee of 46 bps a year. It trades in a solid volume of 637,000 shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Semiconductor ETFs Riding High on Solid Earnings).
Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report)
This fund follows the Indxx Global Robotics & Artificial Intelligence Thematic Index, which seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and AI, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles. It holds 37 stocks in its basket with NVIDIA occupying the top spot at 8.6% allocation. The ETF has AUM of $1.5 billion and average daily volume of 642,000 shares. It charges 68 bps in annual fees (read: ETFs to Gain as Surgical Robots Rise in Popularity).
Global X Video Games & Esports ETF (HERO - Free Report)
This ETF offers exposure to companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality. This can be easily done by the Solactive Video Games & Esports Index. Holding 39 securities in its basket, NVIDIA is the top firm accounting for 6.2% of assets. The fund charges 50 bps in annual fees and trades in average daily volume of 2,000 shares.
VanEck Vectors Semiconductor ETF (SMH - Free Report)
This ETF has AUM of $1.4 billion and average daily volume of about 5.8 million shares. The fund provides exposure to 25 global semiconductor securities by tracking the MVIS US Listed Semiconductor 25 Index. NVIDIA occupies the third spot with 5.8% of the assets. While the American firms dominate the fund’s holdings with 74.8% assets, Taiwan (13.4%), the Netherlands (9.5%) and Switzerland (2.2%) capture the top four slots in terms of its country exposure. The fund charges an expense ratio of 0.35%. It has a Zacks ETF Rank #2 with a High risk outlook.
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